BEIJING, Feb 25 China's steel industry will not
see a quick end to its troubles as overcapacity has reached
staggering proportions and structural adjustments to the economy
have complicated the sector's situation, the nation's top steel
association said.

The world's largest steel industry has been struggling with
overcapacity for years, causing mills to suffer razor thin
margins and saddling them with debt.

While giant iron ore producers are banking on continued
growth in Chinese steel production and consumption to justify
their massive expansion plans, Beijing is anxiously trying to
curb production growth amid fears that persistent losses among
mills could spark a collapse in the heavily indebted sector.

Li Xinchuang, Executive Vice Secretary-General of the China
Iron & Steel Association (CISA), said overcapacity in the sector
was "probably beyond our imagination" and added that the sector
was facing an extremely complicated situation as a result of
slowing growth, structural adjustments in the economy and
policies to close old capacity.

However, demand was still rising steadily, which, combined
with the desire to gain market share, has prompted mills to
continue adding capacity.

China has around 300 million tonnes of surplus steel output
capacity, equivalent to nearly twice the output of the European
Union last year. Still, mills have continued to expand, adding
new capacity of 69.2 million tonnes in 2013, according to a
report by consultancy CUsteel earlier in February.

"These are problems we cannot solve quickly," Li said at an
industry conference on Tuesday.

Iron ore imports by the world's top buyer is expected to
reach 870 million tonnes in 2014, with growth decelerating by
four percentage points from last year's 10.2 percent, Li said.

CISA has forecast China's annual steel output growth to slow
in 2014 to around 3 percent to 810 million tonnes.

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